Top 50 Report 2007

NEW YORK—The ID Top 50 broadliners returned to healthy sales growth last year, expanding almost 9% and approaching becoming an exclusive nine-digit revenue fraternity.

The 2008 ID Top50 Report, which appears in three parts in this edition of ID Report, again demonstrated the volatility among the country's leading distributors with the displacement of three firms. Minimum sales needed to be included in the ID Top 50 jumped $8.5 million to $95 million.

The ID Top 50 distributors together rang up $83.9 billion in sales in 2006, up $6.9 billion from the previous year's reported (not adjusted as it appears in this year's chart) total of $77.03 billion., which was $3.9 billion or 5.4% more than the previous year's reported total of $73.09 billion.

Since 2000, the group's growth rate has been somewhat of a roller coaster. In 2000, the ID Top 50 grew 16.8% from the previous year. The group's revenue increases then dropped for two consecutive years to 4.8% and 3.9% before increasing to 8.7% and 9.5% in 2003 and 2004, respectively.

10 Biggest $ Sales Increases

1. Sysco Corp.

$2,500.0 MM

2. U.S. Foodservice

$717.0 MM

3. Reinhart Foodservice, Inc.

$558.0 MM

4. Gordon Food Service

$300.0 MM

9. Ben E. Keith Foods

$134.0 MM

11. Labatt Food Service

$122.0 MM

3. Performance Food Group

$105.4 MM

6. Food Services of America, Inc.

$100.0 MM

8. Shamrock Foods Co.

$70.0 MM

7. Maines Paper and Food Service, Inc.

$65.0 MM

The average sales growth in dollars, which ranged from a high of $2.5 billion for Sysco Corp., to a Katrina-generated loss of $5 million for Merchants Foodservice, was $103.8 million or 7.2% more than in the previous study. Four ID Top 50 firms reported negative sales growth compared with 2005.

Three new broadliners qualified to become part of this elite group: Agar Supply Co. Inc. (#13), Affiliated Food Service (#48), both of which were uncovered by ID, and Glover-Auten Foods (or Glover Wholesale Co.) (#49), which qualified due to a merger in 2006.

Simultaneously, three distributorships were eliminated: Frank J. Catanzaro Sons and Daughters, which was acquired by Reinhart Foodservice, W.S. Lee & Sons, Inc., which lost revenue due to bankruptcy troubles, and Ginsberg's, Inc., which was squeezed out by the remaining companies.

All told, nine companies moved up in places, 28 dropped and 10 remained in the same position.

As an industry, all foodservice distributorships' sales reached $215 billion, according to Chicago-based Technomic, Inc. Broadliners' sales reached $121 billion last year; systems—$24 billion and specialists—$70 billion. Consequently, the ID Top 50's share of the distributors' revenues last year was 39% and of broadliners—69.4%

Technomic told ID that it had revised revenue figures for 2005, which currently read: Broadline—$115 billion; specialists—$69 billion; and systems—$23 billion for a total of $207 billion.

Therefore, based on the latest figures the industry grew by 3.9%; broadliners—5.2%; specialists—1.5%; and systems—4.3%.

In the previous studies, regardless of revisions, the ID Top 50's share of overall distribution hovered just above the one-third mark. The group's share of the broadline market was about two-thirds. As representatives of companies with greatest sales, their growth continues to outpace the industry as a whole.

10 Biggest % Sales Increases

49. Glover-Auten Foods

38.6%

5. Reinhart Foodservice

27.5%

11. Labatt Food Service

23.7%

27. Zanios Foods, Inc.

18.7%

43. Jacmar Foodservice

16.7%

20. Cash-Wa Distributing

14.9%

19. Glazier

12.3%

25. Wood Fruitticher Grocery

12.2%

29. Banta Foods

12.0%

18. Nicholas and Co.

10.2%

Immovable leader Sysco Corp., Houston, remained in first place with $33.9 billion in sales, an increase of $2.5 billion or 7.9%. U.S. Foodservice, Inc., Columbia, MD, again turned up in second place with sales on the positive side rather than last year's decline, testifying to the fact that the marketplace is accepting its post-scandal refitting pending an upcoming sale. U.S. Foodservice had $19.2 billion in sales, up $717 million or 3.9%.

Performance Food Group, Richmond, VA., remained in third place with $5.8 billion, up more $105 million dollars or 1.84% since 2005. Gordon Food Service, Grand Rapids, MI, was fourth with $5.2 billion, up $300 million or 6.1%. This year Reinhart knocked Food Services of America out of fifth place, an annual occurrence between the two, with nearly $2.6 billion sales, up $558 million or a hearty 27.5%, fueled by a variety of strategic acquisitions and foldouts. (See accompanying chart for complete details.) FSA finished sixth with $2.55 billion.

THE RICH KEEP GETTING RICHER
The ID Billionaire's Club of the nine pinnacle companies, which also includes Food Services of America, Maines Paper and Food Service, Inc., Shamrock Foods Co. and Ben E. Keith Foods, remained unchanged in membership, though Ben E. Keith and Shamrock did change places as they do each year. The subgroup of the richest in revenue distributorships recorded $74.3 billion, compared with $68.4 billion and $65.5 billion in the previous two reports—or 88.5% of all 50 companies' revenues. The 41 remaining firms divided $9.6 billion among themselves.

The top three distributorships' share of the marketplace is also noteworthy. Sysco, alone, captured 40.4% of the ID Top 50's revenues, virtually the same as last year, and 15.8% of the entire industry's volume. U.S. Foodservice had 22.9% compared with 24% in the last study, and PFG—6.9% compared with 7.4%.

Competition for 10th place heated up this year, with three companies vying for the spot: Cheney Brothers, Labatt Food Service and The IJ Co. With mergers and acquisitions driving growth, any one of them could claim solitary control of 10th place next year. However, penetrating that ceiling and entering the ID Billionaire's Club will be difficult since $809 million separates Ben. E. Keith from Cheney Brothers. Only a mega merger of equals would challenge the Texas broadliner's position.

DSR STAFFS GROW
The leading distributorships reported that they employ a total of 19,296 DSRs, marketing associates or territory managers. Last year we reported that the tally was 21,140 but we had pointed out that Sysco listed its 10,222 MA's under a joint DSR/Sales Pro Category. In the current survey, Sysco reported that it has 8,000 sales reps and more 13,900 additional sales associates of varying rank.

Still, more than 40% of the sales reps in the ID Top 50 are employed by the No.1 distributor. Given the importance that Sysco places of periodic business reviews with its customers, it is no wonder that this functional segment numbers nearly 22,000 people.

Distributor executives who chose to respond to the question about DSR hiring, and nearly all did, indicated that they would increase their sales staffs this year, noting that building street business would be a principle effort in 2007.

The rising costs of fuel, healthcare and energy have become perennial concerns of every distributor. In addition, America's leading distributors were also busy expanding their warehouses by adding storage space or building larger facilities and will continue to do so this year. Warehouses, which this year number 425 compared with 418 last year, are being equipped with a variety of high-tech WMS systems and equipment, such as RF, RFID and voice. Fleets are normally fitted with GPS monitors to save on fuel keep tabs on driver efficiency.

Painstaking attention to routes, delivery schedules, drip sizes and surcharges were cited as key methods to counterbalance the affects of high fuel prices.

We asked for the first time about pandemic preparation and environmental issues and discovered that many distributors either have concrete plans in place or are in the process of introducing them.

ID would like to thank all of the executives—those who made the list and those who didn't—for taking valuable time from their busy schedules to respond to the 2008 ID Top 50 survey and contribute to this invaluable overview of foodservice distribution.